Joe Francis and the Santa Monica-based company he built on soft-core "Girls Gone Wild" videos pleaded guilty Tuesday to violating federal laws designed to prevent the sexual exploitation of children and agreed to pay fines totaling $2.1 million.
Under the terms of a deal with the Justice Department, Francis agreed to personally pay a $500,000 fine to settle charges in Los Angeles that he failed to keep records of the ages and identities of the women who appeared in his films. As a result, Francis said in a statement, footage of minors engaging in sexually explicit conduct appeared in at least two DVDs he released.
The videos, which feature young women exposing their breasts and engaging in other racy activities, are sold through late-night advertisements on cable television. Francis' company, Mantra Films Inc., takes in an estimated $40 million a year from the sale of videos such as "Ultimate Spring Break, Vol. 4" and "Girls Gone Wild on Campus Uncensored," according to people familiar with his business.
The 33-year-old entrepreneur, the subject of a Los Angeles Times magazine cover story last month, has come under mounting scrutiny for his personal and business conduct.
As part of Tuesday's pact, Mantra Films agreed to pay $1.6 million in fines and restitution to settle similar charges in a separate case in Florida. Mantra pleaded guilty in U.S. District Court in Panama City, Fla., to 10 counts of breaking federal record-keeping and labeling laws for sexually explicit material.
MRA Holdings Inc., another company owned by Francis, entered into a so-called deferred prosecution agreement under which the government would dismiss all charges if MRA abided by the accord for three years. MRA must hire an outside company to monitor its records and production facilities to ensure compliance with federal law.
"Today's agreements ensure that 'Girls Gone Wild' will comply with an important law designed to prevent the sexual exploitation of minors and puts other producers on notice that they must be in compliance as well," Assistant Atty. Gen. Alice S. Fisher said in a statement.
Francis could have faced more severe punishment including jail time had he not reached the Justice Department settlement.
Aaron S. Dyer, a lawyer for Francis and his companies, said Mantra changed its business practices before the Justice Department launched its investigation.
"The company has already implemented the procedures necessary both to ensure that they have the appropriate records and to comply with the agreements," Dyer said.
In legal statements filed Tuesday, the companies acknowledged that throughout 2002 and part of 2003, it filmed, produced, and distributed sexually explicit materials in violation of record- keeping and labeling laws. Those laws require producers not only to maintain proof of age and identification for performers, but also to carry labels on their videos saying where those documents can be found.
"We regret that this occurred and will make sure that no other minors are used in 'Girls Gone Wild' films," Francis said in his court statement.
Since 1998, Francis has built a business around spring-break revelry and youthful hedonism. The company has released dozens of "Girls Gone Wild" films featuring real footage of young women, often intoxicated, bouncing around bars and beaches and flashing their breasts for the cameras.
A portion of the evidence used by the Justice Department investigation that resulted in Tuesday's guilty pleas came from a separate case filed in Panama City in 2003. The state attorney's office filed a 77-count complaint in Florida circuit court that alleged that Francis and his crew took a 16-year-old girl and four 17-year-old girls to a motel and paid them to engage in sexual conduct with one another in a shower in front of his cameras. He also paid two of the girls $50 each to engage in sexual actions with him, according to the complaint. Authorities seized film footage, Francis' Ferrari and his personal jet.
Francis pleaded not guilty to all charges. After a judge last month suppressed all the evidence, saying it was illegally obtained, Dyer said he would seek to have the case dismissed. He said Tuesday's agreement would have no bearing on the state criminal case in Panama City.
Also pending is a civil case alleging child abuse and sexual exploitation, which was filed against Francis, his crew and his company by the parents of the young women in Panama City.
Based on evidence seized in Panama City, federal investigators stepped in and obtained a search warrant for Mantra Films' Santa Monica office. The FBI has confirmed that it conducted a search of Francis' offices in September 2005.
This is not the first time Francis has been in the cross hairs of the federal government over his business practices.
In 2004, Francis and Mantra Films agreed without admitting guilt to pay a $1.1-million penalty to settle a complaint by the Federal Trade Commission that alleged the company had enrolled customers in its video-buying programs without their knowledge and had misrepresented a money-back guarantee.
This summer, a lawyer for Francis said "the company made a business decision to resolve the matter rather than incur the substantially greater legal fees necessary to successfully defend the matter."
Francis also has been criticized for his involvement with young women during the filming of his videos.
The Times magazine article reported that Francis had had sex with an 18-year-old woman in Melrose Park, Ill., after a nightclub event sponsored by "Girls Gone Wild." The incident took place in a "Girls Gone Wild" tour bus, one of two that crisscross the country to promote the brand and gather footage of female revelers.
Jannel Szyszka alleged that on June 1 Francis gave her alcohol and brought her onboard a bus to be filmed -- with her consent. She alleged that Francis then forced himself on her even though, she said, that she him to stop. Francis denied any wrongdoing, but said through a representative that he had had consensual sex with Szyszka.
In August, Szyszka reported the incident to the police. Lt. Michael Castellan, head of investigations for the Melrose Park Police Department, said the investigation was ongoing.
Dyer said Tuesday that "the claims made by the woman in Melrose Park were not true."